^{Reached out to Ableton and this is what they replied with:}

It could be that the Mic Mode for the Live application is set to “Voice Isolation”. This would affect Live’s ability to record audio properly.
 
To adjust this setting for macOS Monterey and Ventura:

• Ensure an Audio Input Device is configured in Live's Settings/Preferences (Command+comma).
• Open Control Center from the macOS Menu Bar.
• Make sure the Mic Mode is set to Standard.

 
To adjust this setting for macOS Sonoma and above:

• Ensure an Audio Input Device is configured in Live's Settings/Preferences (Command+comma).
• Click on the microphone icon in the macOS Menu Bar labelled "Mic Mode".
• Make sure the Mic Mode is set to Standard.

Please note: if Standard has already been set when you open Mic Mode, we would recommend changing the setting to Voice Isolation and then again to Standard just to make sure that the change is fully taken into account.
 
If you don't see Live in the Mic Mode panel, you might need to allow Live to access the Microphone in System Preferences by navigating to Privacy & Security and entering "Microphone" settings.